PayPal is signaling a major shift in its business model with plans to establish a bank. According to reports, the payments giant has applied for regulatory approval to create PayPal Bank, a move that would allow it to lend directly to small businesses in the United States.
Explaining the rationale, PayPal CEO Alex Chriss noted that establishing a bank would strengthen the company’s business and operational efficiency, enabling PayPal to better support small business growth and expand economic opportunity across the U.S.
At one level, this move makes perfect sense. PayPal already extends small business loans to merchants based on their average monthly transaction volumes. Relying on third-party banks to intermediate those loans increases costs and limits flexibility. Bringing lending fully in-house is therefore a logical step.
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But there is a deeper dynamic at play. PayPal is feeling the pressure of fintechnolization. As digital platforms mature, they increasingly embed financial services directly into their ecosystems. Banks are now partnering with platforms to offer payments, lending, and financial products seamlessly on websites and apps, often bypassing intermediaries like PayPal. This shift is gradually eroding PayPal’s addressable market.
Fintechnolization is the process by which every mature digital platform evolves into a financial services provider, embedding payments, lending, insurance, savings, and other financial primitives directly into its core product, often without looking like a traditional fintech company.
To counter this disintermediation, PayPal must vertically integrate. Securing a banking charter allows it to control more of the value chain, reduce dependence on partner banks, and retain economics that would otherwise be shared or lost. In doing so, PayPal also avoids “feeding” banks that are simultaneously competing with it through banking-as-a-service models. A good move for PayPal even though PayPal did not treat Nigeria well, but gracious goodness, we do not miss it in Nigeria.
PayPal Seeks Regulatory Approval to Launch PayPal Bank, Targeting Small Businesses
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